The EWEA report notes that offshore wind has been one of the fastest growing maritime industries in Europe, but continued growth will require moving into deeper water - that is, water depths greater than 50 meters. The report also highlighted the fact that while the resource is huge - deep water wind from the North Sea alone has the potential to supply European markets “four times over” - many technological, economic, and political hurdles must be overcome. The political issues cited include the need for a commitment to long-term renewable energy targets, a clear legislative framework and cohesive European industrial strategy, simplified permitting processes, increased public support for R&D, stronger collaboration between players, new standards for floating wind systems and access to financing. A host of technical recommendations were offered up, while economic recommendations focused on training, port adequacy, and development of self-installing systems to minimize installation costs.

Image: blog cleanenergy.org

EWEA forecasts that by 2020, they could see up to 40 GW of offshore wind in European waters “provided that the right framework conditions are in place.” However, here’s the rub: Getting the technology and industrial policies right is only one piece of the puzzle, and will ultimately not be the limiting factor. The real problems are going to be the challenge of integrating a significant level of fluctuating wind energy into the electric grid, getting costs low enough for the resource to be attractive, and setting the pricing policies right so that investors gain the necessary confidence to proceed.

Integration of high levels of wind can be done, but you need the right pre-conditions. Denmark, by far the leader in the area of wind development and integration, has over 25% of it energy coming from wind turbines with an eventual goal of 50%. However, it can only integrate its massive wind resources because it has access to storage in the form of the hydroelectric resources which sit behind Vattenfall’s dams in neighboring Sweden. When the wind power is in excess of Denmark’s needs, it exports to Sweden through strong interconnecting lines. Vattenfall then flows less water through its dams, which essentially function as a giant battery. On calmer days, when Denmark needs the power, the electricity flows in the other direction. So far, the Danish market has proceeded relatively smoothly, but the New York Times notes that Danish consumers already pay more for electricity than the average European. Integrating high levels of offshore wind into the rest of Europe (which does not have large hydro resources) will pose some challenges.

Germany has also been aggressively pursuing the wind resource, and pushing offshore. However, the experience in Germany has been somewhat more turbulent and has recently exposed some significant problems. According to the 7/29 issue of Der Spiegel, Germany started with the goal of locating its turbines further from the coast to avoid marring the view. Escalating costs (driven in part by the technical challenges and price tag of the required solutions) drove up electricity prices, which resulted in a political discussion on setting potential price caps for wind. Though these caps were ultimately not approved, the specter of a deteriorating price regime spooked investors, and the winds for offshore energy developers suddenly became very chilly indeed.

Der Spiegel notes that turbine manufacturers were almost immediately affected, laying off employees who were recruited just a few months prior. Siag Nordseewerke has filed for bankruptcy, and others may follow suit. Although a number of offshore farms are still being built (based on the earlier momentum), no new follow-up contracts are being signed.

The economic fallout appears to be spreading: The $165 Cuxhaven port facility – reinforced to handle the loading of massive turbine foundations onto ships – is now idle. Austrian construction company
Strabag recently closed its Cuxhaven office. Other companies only have a forward view to production through the end of the year. Bremerhaven and other ports are seeing slowdowns as well. Meanwhile, the talent base and expertise built up over the past years has begun to dissipate, and will take time to rebuild if the offshore wind ever regains its footing.

Europe may indeed have the offshore wind resources to power the continent. But it must be very cautious about how the entire process is structured and moves forward. It will need to spend a good deal of time focusing on both the pricing subsidies and ensuring sufficient capability to integrate wind energy into existing power markets. The experience of Germany is a cautionary tale for the rest of Europe as it steps out to further develop its offshore resource. It’s a lesson the U.S. offshore enthusiasts should watch closely as well.